- Bitcoin’s brutal week has come to an end.
- These four factors will signal how long the recovery will take.
Bitcoin plummeted as low as $54,300 early Monday, marking a more than 15% drop since last week.
The crash dragged the overall crypto market with it, with total market valuation tumbling almost 20% to $2.1 trillion, according to CoinGecko.
“The streets are covered with haemoglobin,” said an analyst at crypto trading firm Wintermute, capturing the mood among investors.
But how bad will the bloodbath get?
Experts point to four factors driving the price.
Ethereum ETFs
Industry pundits anticipate US regulators will approve spot Ethereum exchange-traded funds as early as this week.
The market’s reaction to any positive ETF update will serve “as a barometer of market sentiment as people lick their wounds and begin to shake off last week’s move,” David Zimmerman, analyst at K33 Research, told DL News.
It “would be a great sign” if the launch sees Bitcoin surge back to levels around $60,000, Zimmerman said.
Given how closely Bitcoin and Ethereum correlate, a spot Ethereum ETF would also be bullish for Bitcoin.
If Bitcoin’s price rose, Zimmerman says it would indicate that despite the latest bearish market, investors still have an appetite for assets like Bitcoin.
Analysts estimate spot Ethereum ETFs will see inflows of $500 million within one week of their launch and $15 billion in net flows in their first 18 months.
Since their launch six months ago, Bitcoin ETFs have seen a record $14 billion in inflows.
Mt. Gox repayments
The wait for Mt. Gox users to get their money back is ending.
Creditors have waited a decade to get back up to $9 billion owed in crypto after the exchange’s catastrophic collapse in 2014.
On Friday, the entity in charge of payments, began returning $2.6 billion in Bitcoin to creditors.
Many expect creditors to sell their holdings as soon as they hit their wallets.
“This will weigh on the market once repatriation picks up in earnest or the market starts to pay more attention,” Brian Rudick, senior strategist at crypto trading firm GSR, recently told DL News.
Others suggest the damage of Mt. Gox repayments to crypto prices is already past.
“These distributions are now close to or fully priced in,” Wintermute’s analyst said.
Germany
The German government moved over 10,000 Bitcoin, or nearly $1 billion, to different wallets and exchanges since June 19, according to Arkham Intelligence.
This helped trigger the crypto crunch last week as traders interpreted the government’s move as a sign that it plans to sell hunks of its billions in Bitcoin.
“The German government might slow down now,” Zimmerman said.
Federal Reserve
Traders also monitor signs that the Federal Reserve is satisfied with its fight against inflation.
A cut in interest rates mean investors are more likely to buy up riskier assets like crypto.
US jobs data in May showed an uptick in unemployment, cementing some experts’ view that cuts will come soon.
“September is looking like a lock for the Fed to begin the rate cutting cycle,” with the market expecting two cuts for 2024, David Brickell, head of international distribution at FRNT Financial, and former forex trader Chris Mill, wrote in their latest “Connecting the Dots” newsletter.
Eric Johansson is DL News’ News Editor. Got a tip? Email at eric@dlnews.com.
